Boomergeddon Update: $31 Trillion Debt by 2030

Source: Congressional Budget Office

by James A. Bacon

According to the latest Congressional Budget Office (CBO) projections, the federal budget deficit will hit $1.0 trillion in 2020 and will average $1.3 trillion annually for the rest of the decade. Deficits will increase from 4.6% of gross domestic product each year to 5.4%. Most alarmingly, chronic deficits will push the national debt as a percentage of the economy from 81% this year to 98% in 2030, and to a mind-blowing 180% by 2050.

In my book, “Boomergeddon,” written 10 years ago, I went out on a limb and forecast fiscal collapse by the early 2030s, soon after the Social Security trust fund ran out and Congress had to make no-win decisions on how to cope with the inability to maintain retirement payments to seniors. While things still appear dire by 2050, a 98% debt-to-GDP ratio in 2030 looks manageable. Perhaps I was too pessimistic.

The CBO’s not-so-rosy forecast makes one big assumption, however: There will be no recession this decade. The current business cycle is the longest in U.S. history. So unless the geniuses who run the economy have truly figured out how to engineer perpetual prosperity, the U.S. is at extremely high risk for another recession within the next ten years. When it comes, the picture will change dramatically. Let’s see what CBO’s long-term forecasts look like when deficits are running $2 trillion a year!

One other factor I don’t think the CBO takes into account is what happens as the global population ages. Right now, the world is enjoying a capital glut arising from massive saving around the world in anticipation of the retirement tsunami. As people age, they draw down the wealth they’d spent a lifetime building, not just their personal savings but collective savings in the form of pensions and social security programs. And not just in the United States but around the world. Over a 30-year time horizon, it seems inconceivable that the global capital glut will persist. If it doesn’t, interest rates will rise, and the cost of shouldering the national debt will surge… running up deficits even faster.

On the other hand, the CBO does make one pessimistic assumption: that long-term economic growth in the decade ahead will slow to 1.7% annually, driven by slower growth in the workforce. If — a big if — we can sustain annual growth rates of 2% to 3%, the long-term outlook will look much better. That is my only hope that we can avoid catastrophe. Over a long enough period of time, — by the 2060s — all the Baby Boomers will have died off (sniff! sniff!), the entitlement crisis will ease (assuming Bernie Sanders isn’t elected president), and American society just might muddle through.

Everybody’s favorite political game is blaming the other guy for the deficits. Democrats blame tax cuts and military spending. Republicans blame entitlements and soaring discretionary spending. Both are right. Our long-term fiscal outlook stems from the bipartisan compromises made over decades. The only thing that can divert us from our current trajectory is if the next president seriously pursues a fiscally profligate policy such as Medicare for All, free college education for all, or the Green New Deal…. in which things will get worse in a hurry.

Barring such an eventuality, we’re on course for things to get worse slowly but steadily — until the next recession, in which case all bets are off. I still think Boomergeddon by 2035 is a realistic (though not inevitable) prospect.

I’ve preached on this blog that Virginia’s political establishment needs to prepare for the possibility of a federal fiscal breakdown, which would have even more calamitous effects on the Old Dominion than it would nationally. Sadly, Republicans never took the notion seriously, and now Virginia Democrats have thrown all caution to the winds. The only questions are how much will taxes and spending increase, how dependent Virginians will become upon state government programs, and how resilient (or vulnerable) will our economy be to a federal spending shock.

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12 responses to “Boomergeddon Update: $31 Trillion Debt by 2030”

  1. Steve Haner Avatar
    Steve Haner
    So where do I put my assets? Given all this, and desiring to have some way to live in 20 years (respirators need electricity….), gold? Blue chips? A can in the back yard?

    1. LarrytheG Avatar

      Dominion Stock? 😉

      Hot Tip: Infomatics

    2. I wish I knew the answer. If Boomergeddon is 20 years off, though, you may not have to worry about it. Just worry for your children.

    3. I’m investing in lead and brass.


  2. Peter Galuszka Avatar
    Peter Galuszka

    Not one mention of donald trump.

    1. Not one mention of Barack Obama either.

  3. LarrytheG Avatar

    re: ” Everybody’s favorite political game is blaming the other guy for the deficits.”

    Not entirely true. The Dems have always been much more sanguine about deficits/debt whereas the Conservative types have, until this point, been the hair-on-fire types and run for election against the tax & spend liberals and with some justification and success!

    No MORE! Now, the former GOP fiscal hawks have morphed into Trump sycophants who write articles in Conservative media about how the deficit/debt thing was overblown anyhow and especially now that we have had the longest running boom economy EVER! MAGA!

    See how easy that transformation is?

    Seems like the crux of the deficit doom and gloomers has always been that SOME DAY – the folks who bought and now hold US Treasury notes would lose confidence in our currency and come to get their money and we’d be doomed!

    Funny thing… the American dollar is still considered one of the safest currencies on the planet.

    As bad as we are, the others are WORSE! In Europe, when you loan the govt money, you don’t earn interest, you PAY it! That’s right, if you want to “park” your money in a “safe” place – like the govt , they now charge YOU.

    But, the gloom and doomers just pine away – patiently waiting for financial hell to finally befall us and “told you so”!


  4. Social Security trust fund issue is demographics, going now below 2 kids per average married couple, versus 3 kids in the past years. That means a haircut to about 80% of current SS payout in the 2030’s, or else we have to increase funding. Battle lines drawn there already.

    1. LarrytheG Avatar

      People need to distinguish between the SS “trust fund” and the social security system itself. The “trust fund” is a large pile of money that was accumulated over decades when the FICA tax was bringing in more than was paid out.

      Once we reach the point where existing FICA taxes no longer are enough to pay 100% of scheduled benefits – they’ll draw down on the trust fund until it is empty or until changes are made to Social Security to keep it from paying out more than it takes in.

      There are a number of viable options for doing it but if the partisan gridlock continues there is the real possibility that it too will become a victim of the partisan divide and payouts will have to be reduced.

      Ironically, the booming economy is adding more years to the moment of trust fund truth… Keep in mind also, that the GIG economy, like UBER – those folks still have to pay FICA taxes….all of it , not split between them and their employer.

      1. Last year I saw a talk at the Arlington public library by the head PhD actuary for Social Security. Maybe I can get away with excerpting some of my proposed blog article that got cut for lack of Va. subject line:

        “Can Social Security survive financially? That is what Social Security staffer Stephen Goss was telling us about.

        Demographically, reduced birth rates is the big societal change driving Social Security funding. As a baby boomer, I have one brother and one sister, so my folks had three (3) kids, which was exactly the U.S. average birth rate in the boomer era. Not wanting to violate the law of averages, my wife and I have two (2) children, which is exactly the U.S. average birth rate today.

        After all of the actuarial calculations are done, and given the current size of the SS trust fund, 2034 is the magic year when my two (now adult) children must start paying extra into Social Security to cover all of us aging boomers. Of course, Congress has choices. Either they have to increase funding in Social Security, or they can cut everyone’s benefits to and estimated 80% of today’s levels, or some other alternate solution. Needless to say, there will likely be heated future debates, but note that the 2034 deadline gives some lead time.

        Some very interesting new demographic trends are emerging. Disability claims for Social Security coverage are rapidly falling since 2010, which is unexpected and very good news. Nobody knows exactly why. We might speculate that the service economy of today is more welcoming to disabled persons. This development bodes well for future SS funding.

        But unfortunately an off-setting trend is that average U.S. birth rates are now falling below two(2) per family. Another “negative” trend for SS funding is that longevity is increasing. However, the longevity trend has recently leveled off, sadly perhaps reflecting the impact of the opioid crisis.

        The problem with the emerging new trends, from a planning perspective, is not knowing if they will continue, and to what extent. “

  5. djrippert Avatar

    Larry and Peter are right. The conservative outrage at deficits in general and Obama’s deficits specifically has evaporated with the Trump presidency.

    For the wonks … this is a good, detailed description of possible solutions to the US debt problem from a conservative perspective:

    1. LarrytheG Avatar

      so do we consider the Conservatives embrace of the deficit/debt issue as just a thing to attract voters and when push came to shove, they just bailed because they never really believed it anyhow? That seems to be what they’re saying now… they sounds like the tax & spend folks used to sound!

      We now have an economy that is doing well… because of the tax cuts – that are being paid for with debt.

      Sounds like Greece. No?

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